The Minister for Economic Affairs, Lyonpo Loknath Sharma

Enough foreign currency reserves to last 13 months

During the Meet-the-Press held on Thursday, Lyonchhen Dasho Dr Lotay Tshering and Minister Loknath Sharma shared that the Central Bank has enough reserves for import of essential items for 13 months.

To conserve the dwindling reserves, the government put in a moratorium for vehicles, where all the import of vehicles were banned except for utility vehicles, heavy earth moving machines and agriculture machineries from 19 August 2022.

Minister Loknath shared that vehicle moratorium helped with conserving the reserves. “Looking at the data of half yearly imports, nearly 2 billion reserves are used to import vehicles. Keeping the moratorium of vehicles helped conserve the reserves and helped prevent the outflow of reserves.”

The vehicle moratorium was further extended in the early months this year, from 18 February for another six months. According to the notification from the Ministry of Finance, this was done so after careful consideration of the foreign reserves position and essential imports mandated by the Constitution.

The Constitution mandates to have a minimum of foreign currency reserves that is adequate to meet the cost of not less than one year’s essential imports.

According to the Prime Minister, we are sustaining through grants and loans. PM said, “To replenish the convertible currencies, we need businesses that makes profits in Indian currencies and we don’t have much of such businesses, we need loans and we are availing those, and we need grants and we availing those too. Through grants, loans, and business profits, we are able to sustain not very comfortably but comfortably.”

When the paper talked to Minister Loknath, the then Minister for Economic Affairs about foreign reserves in August, he shared that to preserve the foreign reserves, there will be three phases of restrictions depending on the situation.

The first phase was instituted with the moratorium on vehicles on August and since then, it has been extended in February this year. The second phase moratorium was to be on the import of non-essential items.

With regard to this, the Prime Minister shared that the moratorium on import of non-essential items will depend on the general reserves.

He added that under the revised guideline, the essential import requirement for 12 months is USD 603 million. With the ongoing forecasts and trend, the Central Bank will alert the government before 3 months if the reserves are found to be in critical stage. If we receive the alert, we probably will have to go to the second phase and currently, we are not in the stage.”

Beginning in February of this year, the government reduced the USD 668 million (mn) value of the essential import requirement for 12 months to USD 603 mn for the normal period and USD 464 mn for the critical period.

The Prime Minister added that things are picking up positively. “Indian economy is one of the best in the world currently, and ours is pegged with Indian economy and the growth rate of nearly 5 percent is very good when the growth rate of many countries is in 1 percent or below 1 percent. Inflation has come down to almost pre-pandemic levels.”

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